ANNUAL REPORT 2011 PNG PORTS CORPORATION LIMITED

Transcription

1 ANNUAL REPORT 2011 PNG PORTS CORPORATION LIMITED

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3 PNGPCL 2011 ANNUAL REPORT - Covers & Contents.indd 3 9/12/13 11:09 AM

4 PNGPCL 2011 ANNUAL REPORT - Covers & Contents.indd 4 9/12/13 11:09 AM

5 2011 Annual Report Content About us in brief Our portfolio of ports Overall performance highlight Chairman s Report Chief Executive Officer s Report Operations Review Corporate Governance for the year ended 31 December 2011 Directors s Report... 31, Auditor General s Report Statement of Financial Position Statement of Comprehensive Income Statement of changes in Equity Statement of Cash-flows Note to and forming part of the financial statements PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 1

6 PNG Ports Corporation Limited About us in brief 2 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

7 2011 Annual Report Our Vision To be the premier maritime service company in PNG Our Mission To be the premier maritime service company in PNG by facilitating economic growth through: Quality and efficient service delivery Profitability Sustainable investment in infrastructure Exceeding stakeholder and shareholder expectations and Meeting legislative and community service obligations We value... Service Excellence Commercial Astuteness Forward thinking and improvement Safety and security first Teamwork Zero tolerance on fraud and corruption Sustainable outcomes PNG Ports Corporation Limited ( PNGPCL ) is proud of itself as the national pillar for maritime trade and human s mobility through its providing of essential port services covering wharfage, berthage, pilotage and facilities for storage and handling of cargo at the fourteen (14) declared ports across the Maritime Provinces of Papua New Guinea ( PNG ). Following corporatisation, the Company has been committed to injecting significant capital outlay on the rehabilitation, development and modernisation of its network of ports with a goal of improving their overall operational efficiency and productivity. Whilst PNGPCL will continue to operate as a commercial entity with a firm focus on translating its investments into wealth creation and maximisation for its shareholder, it will continue to play its role as one of the key partners of the government in driving the national development plans and goals for the country as they relate to the maritime service. Through an instrument of delegation by the Department of Transport, PNGPCL ensures that the development and operations of all ports including that of its own are in accordance with relevant regulatory underpinnings. By the nature of its function, PNGPCL s commercial pursuit to a larger degree is regulated by the Independent Consumer and Competition Commission ( ICCC ) through the Independent Consumer and Competition Commission Act 2000 and the binding Regulatory Contract. Since corporatisation, PNGPCL has been growing from strength to strength to become one of the modern and dynamic corporations in PNG with a longterm asset base of over K1.1 billion and a workforce of about 800 staff as at 31st December PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 3

8 PNG Ports Corporation Limited Our portfolio of ports Ports and Contact details 4 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

9 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 5

10 PNG Ports Corporation Limited Year at a glance Overall performance highlight Chairman s report Chief Executive Officer s report 6 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

11 2011 Annual Report Overall Performance Highlights Total cargo throughputs movement Increased by 7.8 % Total containerised cargo movement Increased by 8.3 % Total non-containerised cargo movement Increased by 7.8% Top 3 leading cargo trading ports Lae (46%), Port Moresby (26%) and Kimbe (9%) Operating revenue Increased by 44.7% Operating expenditure ex depreciation Increased by 38.1% Net Profit after Tax Increased by 168.2% Net asset Increased by 217.5% Shareholder s fund Increased by 216.2% Return on shareholder s fund 6.3% PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 7

12 PNG Ports Corporation Limited CHAIRMAN S REPORT company s business, which saw a highest volume of cargo turnover of 7.7 million revenue tonnages ( RT ), an increase of 8 percent. The latter was driven by the un-abating domestic economic growth. With a positive growth outlook for the country in the foreseeable future, we are optimistic PNGPCL s business will continue to outperform the realised records in the years ahead. I am delighted to present the 2011 Annual Report for PNG Ports Corporation Limited. PNGPCL made a highest after tax profit of K47.6 million in its entire history. This profit surpassed the record 2010 performance by 169 percent. For the first time in many years, the Board declared a record dividend of K18.1 million, whilst the rest were ploughed back into the company to boost its balance sheet position for supporting an ongoing implementation of the five year capital expenditure ( capex ) program. The company also recorded a solid balance sheet with a well managed debt level reflected by a gearing ratio of 38 percent which is below the 50 percent benchmark and an interest cover of 47 percent. The total assets increased to over K1 billion in 2011 following significant investments in long-term capital assets. The owners equity increased significantly to over K756 million following retainment of about 62 percent of the profit and significant gains realised from assets revaluations. The record performance was due to internal financial discipline, workforce s commitment, effective assets utilisation and more so by the solid growth in the Considering the current and future growth in demand, the Board supported the company introducing significant changes to the two premier ports, Lae and Port Moresby, that consistently handle more than 70 percent of the overall cargo throughput volumes. The company made a strategic investment in the procurements of three Mobile Harbour Cranes ( MHC ) and ten Rubber Tyred Gantry Cranes ( RTGs ) for deployment at these ports. In addition, the company has been having an effective collaboration with the Independent Public Business Corporation ( IPBC ) to advance the Lae Tidal Basin project into development and operation. The signing of a contractual agreement between the Government of PNG for and on behalf of the IPBC and Chinese Harbour Engineering Corporation for the latter to commence construction on this project in early 2012 represented one of the fruitful outcomes of this collaboration. The Return on Shareholders Fund was 6.3 percent after the community service obligations. PNGPCL has continued to cross-subsidize the operations of eleven underperforming ports with the earnings generated by the top three profitable ports including Lae, Port Moresby and Kimbe. The Board will continue to ensure the company fulfills this important function until an alternative arrangement is instituted to support those underperforming ports since PNGPCL is a usefull 8 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

13 2011 Annual Report strategic partner of the government in supporting service delivery. The Board values a high corporate governance standard by ensuring the company adopts, implements and refines sound internal audit systems and processes governing all facets of its operations, which includes having zero tolerance on corporate fraud and corruption. direction for the overall running of the company. With that I take this opportunity to thank the Board members and the management for their support and am looking forward to your continued support in the 2012 financial period. *This report relates to the period during which PNGPCL was under the chairmanship of Dr. Illa Temu. In order to continue achieving business and operational excellence in the years ahead, the Board will continue to maintain the same level of cooperation and collaboration with the management in term of providing sound strategic Nathaniel Poya, OBE Chairman PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 9

14 PNG Ports Corporation Limited Chief Executive Officer s Report The challenges ahead are enormous as some of these initiatives are critical and will directly address and affect the way business is conducted. As a result, some initiatives may be largely opposed due to misconceptions therefore a lot more awareness on the net gains inherent will need to be conducted to ensure harmony with different stakeholders. PNGPCL achieved a strong growth in the overall trade in Cargo throughput recorded 7,709,939 RT representing an 8 percent increase from Container throughput also improved by 13 percent with a record of 314, 411 Twenty-foot Equivalent Units ( TEUs ) whilst the total number of Vessel calls registered for the year was 7, 675 representing an increase of 10 percent. The ports of Lae, POM and Kimbe continued to stand out as the busiest and profitable ports that handled 81 percent of PNGPCL s total cargo trade and generated 80 percent of total revenue. The underperforming ports on the other hand were cross subsidised with funds generated from the profitable ports as part of PNGPCL s Community Service Obligation ( CSO ) in order to maintain service delivery. Indeed, service delivery and customer satisfaction have been the centre of PNGPCL s overall business conducts. Thus, in 2011 the company committed capital expenditures worth approximately K158 million toward port development initiatives. Such initiatives included the deployment of the RTGs and MHCs at Port Moresby and Lae ports. The state-of-the-art port equipment are anticipated to enhance port and terminal productivity. PNGPCL achieved a good financial standing this year with the dramatic increase of total assets over the past 5 years to K1 billion. This reflects the significant investment in new capital assets to improve the operations of the ports. PNGPCL also achieved another milestone this year in terms of safety and environmental regulations when it became an International Standard Organisation ( ISO ) certified entity for various safety and management systems which are scheduled for implementation in Knowledge and skills enhancement of staff is an integral part of the growth of PNGPCL. Through the Human Resource division, training programs were facilitated on areas of port operations, finance, infrastructure, safety, life skills and ICT. The organisation is also proud to have in place a Graduate Development Program and Maritime Cadetship program aimed at moulding university graduates into vibrant working professionals who can contribute effectively to PNGPCL. This year PNGPCL took a proactive approach in promoting the welfare of its employees by organising 10 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

15 2011 Annual Report free medical checks for all Head office and POM port staff. Medical checks will also be rolled out to the outer ports. PNGPCL continued to uphold itself as a responsible corporate citizen by undertaking a number of community service initiatives this year. This included the sponsorships of worthy causes for various organisations and individuals, as well as partnering with civil societies to take a stand against major social issues such as the Fight against HIV/AIDS and elimination of Violence against Women and Children has certainly proven to be a successful year for PNGPCL and the organisation is determined to achieve greater and better results in the coming year. I sincerely thank the executive management team and staff members for their efforts and commitment in 2011 and look forward to the continued support and cooperation in *This report relates to the period during which PNGPCL was under the leadership of former Chief Executive Officer Mr. Brian Riches. STANLEY ALPHONSE Chief Executive Officer PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 11

16 PNG Ports Corporation Limited Operations review Human Resource Major Projects International Accrediation Community Engagement Trade Performance 12 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

17 2011 Annual Report Operations Review Human Resource The total staff strength as at the end of December 2011 was 782 representing a 14% increase from the corresponding period due to an ongoing recruitment drive including the engagement of vacation students for short-term employment. PNGPCL had 15 departments, the largest being Operations which constituted 53 percent of the entire workforce. Employment distribution by gender, 2011 Female 27% Male 73% Employment Distribution by Department, 2011 Maritime Compliance 2% Corporate Services 6% Operations 53% Business Assurance 2% Infrastructure 6% Finance 6% OHSE 0% Property 5% Legal 2% Security 2% In terms of gender distribution, females constituted 27 percent of the workforce whereas males 23 percent. Even though the number of female employees has improved by 6 percent from 2010, there is still an evident gap in comparison to the male workforce. This has been taken note of and appropriate strategies will be implemented to reduce the gender imbalance. Employees are a great asset as they are integral to the achievement of the company s goals and objectives. PNGPCL, thus, has employed well-defined strategies to improve the existing knowledge set of and motivate the staff to offer their expertise and loyalty without reservations. PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT CEO's office 2% ICT 4% HR CNB 4% Corporate Comm 1% In 2011, the management rolled out training programs to up-skill the employees on areas of Port operations, Infrastructure, Maintenance, Safety, Life Skills, Security, Finance, ICT and other areas of importance to PNGPCL s future business needs. Also in 2011, two graduates engaged with the Human Resource Department were confirmed to permanent positions whilst 15 attached to Port Moresby port entered into their third rotation stage within the Operations Department. After completion of the training, graduates would be permanently assigned to roles in the company subject to availability of vacant positions. From the first batch of four (4) maritime cadets recruited in 2009, three (3) have commenced sea time training with Steamships Shipping Company in Under an arrangement between PNGPCL and Steamships, cadets take up 18 months sea time with Steamships on a three months-one-month-off rotation program where they are given the opportunity to board gross tonnage vessels owned and operated by Steamships Shipping Company. PNGPCL has been taking a proactive approach 13

18 PNG Ports Corporation Limited Operations Review in promoting the welfare of its employees. Apart from providing appropriate remuneration packages reflective of the current cost of living in urban areas, the management took a step further and implemented programs aimed at promoting the health of its employees. The RTGs are scheduled to swing into full operation by May They are anticipated to be pivotal in maximising storage spaces and overall efficiency in container handling. In the face of growing container volume and spacing constraints, RTG represents an important capital asset acquisition. Free medical checks were organised in May 2011 for all the employees at the Head Office and POM port. The medical check included a thorough medical examination for blood pressure, cholesterol and blood sugar level and Tuberculosis (TB). Employees diagnosed with health issues of concern were referred by the medical practitioners to seek further investigation and treatment. PNGPCL will be rolling out the Staff Medical Check program to the outer ports. Also in 2011, one MHC was purchased for Port Moresby port and is expected to be delivered by January 2012 after all the foundational activities are completed. Lae port has already been deployed with one MHC and another is scheduled to be delivered in February MHCs are anticipated to accelerate the rate of movements of inbound and outbound containers and shorten vessels turnaround time, thus, reducing berth congestion and vessels queues. Major Port Modernisation Exercises PNG has been experiencing a consistent economic growth over the past ten years. With the multi-billion kina LNG project scheduled to enter into the production phase by early 2014 coupled with a positive economic outlook in the other sectors, the PNG economy is on a path of extending its growth into the foreseeable future. As part of its preparation to meet the burgeoning demand associated with the current and future growth, PNGPCL undertook a strategic port remodelling and modernisation exercise at the two premier ports. The total capex of about K158 million for the year is inclusive of the cost of the above initiatives. In late 2011, PNGPCL engaged STET Maritime of Singapore to conduct Port Planning and Terminal Operations training for 24 Port Operations Officers scheduled for Portek Ports Holdings Pte Ltd, the supplier of the RTGs will facilitate the training in line with its Training and Technical Services Agreement with PNGPCL. Remodelling at the two premier ports involved redesigning and improvement in the layout of the quay face which included rearrangement of the container terminal areas to facilitate for efficient operations by all service providers and improve customer service delivery. The remodelling was valued at K41 million. A total of ten RTG cranes were procured of which three were deployed at Port Moresby port and seven at Lae port. The Lae Tidal Basin Project is another key development initiative that is anticipated to improve the efficiency 14 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

19 2011 Annual Report Operations Review of Lae port. Led by the IPBC, the project will involve the construction of a tidal basin (700 x 400 metres), a multipurpose berth and terminal works with a built-in flexibility to increase the capacity of the port. This stateof-the-art port infrastructure will provide 240 metres of extra berthing space and will be able to cater for Post- Panamax container vessels. The PNG Government through the IPBC negotiated a loan from the Asian Development Bank ( ADB ) to fund the construction of the Tidal Basin at a total cost of more than US$300 million. Being an important stakeholder in this project, PNGPCL has been in close consultation with IPBC and other relevant government authorities on the plans to progress the project. The contract negotiation on the construction and supervision of the Tidal Basin Project has progressed well in 2011 with construction expected to commence in early International Accreditation Port Safety and Management PNGPCL, again in 2011, conducted its operations in compliance with the safety and environmental management requirements pursuant to the Environment Act 2003, Contaminants Act 1978 and Environmental Contaminants (Pesticides) Act 1978 including relevant international conventions and protocols. Whilst the control and regulatory oversight over the development and operation of ports are vested with PNGPCL through the Harbour Management Service division, PNGPCL did not exploit its regulator status as in engaging in any practices that compromised with the required port safety and management standards under the regulatory framework. Other projects undertaken in 2011 included the general repairs and maintenance of port facilities in the outer network of ports such as: Causeway Lighting repairs at Wewak port New Gate Entrance at Rabaul port Renovation to Daru port office and Business Manager s residence Repairs to Wharf head flood lights at berth 1 for Madang port PNGPCL will continue to pursue modernisation and redevelopment efforts, not only in the major ports but in other ports as well where demand necessitates. In November 2011, PNGPCL achieved a milestone when it was assessed by an independent International Certification company to have developed and applied a sound management system relating to overall safety and environment management standards that are consistent with specific requirements of the ISO 9000 family of standards and was consequently certified in the following categories; ISO 14001:2004 International Standard Environmental Management Systems; OHSE 18001:2007 International Standard Safety Management Systems ; and AS/NZS 4801:2001 Australia and New Zealand Standard Safety Management Systems. PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 15

20 PNG Ports Corporation Limited Operations Review Implementation of the systems will commence in The certification currently covers the PNGPCL Head Office and Port Moresby port. There are plans to extend the certification to the rest of PNGPCL s network of ports. stakeholder relationships with members of the communities through various forms of community service initiatives. In 2011, PNGPCL provided sponsorships in both cash and kind to various organisations and individuals for worthy causes. Some examples included:- Community Engagements Highlights In the reporting period, about 99 percent of the total EBITs was generated by the ports of Lae, Port Moresby, Kimbe and Rabaul whereas the other ports were still underperforming with no change in the prospect of them improving in the short to medium term horizons. Nevertheless, PNGPCL is being committed to financing and sustaining their operations through the on-going cross-subsidisation program with surplus earnings derived from the profitable ports under its longterm commitment to partner with the government in facilitating service delivery to all the Maritime Provinces as espoused under the Country s medium term development and strategic plans. In light of emerging competitive threats following the entries of other private port operators into the industry, a continuation of the cross-subsidisation program into the long-term would surely not be a viable practice. Thus, PNGPCL is considering developing and introducing an alternative operational structure, in close consultation with relevant stakeholders, to sustainably operate these ports into the long term. This represents one of the strategic actions of the company in the years ahead. Sponsorship of Canoe and Kundu Festival in Alotau, Miline bay Province Donation to displaced Manam Islanders, Madang province Sponsorship of PNG Paralympics Team to participate in Electronic Sports 2011 World Championships Sponsorship of Media Freedom Week Sponsorship of Divine Word University Cultural show Sponsorship of Medical Symposium Also in 2011, PNGPCL, in partnership with various organisations and civil societies, participated in various annual events to raise awareness on the major social issues affecting the society at large which included:- White Ribbon Day (Elimination of Violence against Women & Children) Transparency International Walk Against Corruption Red Ribbon Day (World HIV/AIDS Day) Pink Ribbon Day - Awareness on Breast Cancer PNGPCL as a responsible corporate citizen is being committed to building and maintaining coordinal 16 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

21 2011 Annual Report Operations Review Trade Performance Analysis Kimbe handled about 9 percent of the total cargo throughputs which is similar to its standing in the Cargo throughput corresponding period. The total volume of cargo passed through Kimbe port did not change much compared In 2011, PNGPCL handled another record overall cargo throughput volume of 7.2 million RT, representing an increase of 8 percent. The rise was mainly attributed to increased volumes in the external trade sector by 13 to the previous period. Rabaul is the fifth leading port handling about 5 percent of the total cargo throughputs. All the rest accounted for less than 5 percent of the total throughputs percent relative to the corresponding period due to both strong domestic output and demand for foreign goods. 9,000,000 Overall cargo throughput 20.00% In terms of decomposition of cargo by sources of trade, the volume of coastal cargo contracted by 1 percent T R G 8,000,000 7,000,000 6,000,000 5,000,000 4,000, % 10.00% 5.00% compared to the corresponding period with the major cargos traded in the form of bulk fuel, barge, fish and 3,000,000 2,000,000 1,000, % -5.00% % pass. The volume of exports increased by 15 percent whereas imports 11 percent. Coastal and Overseas Cargo 6,000,000 Lae consolidated its position as the leading port in 5,000,000 handling the cargo movement. In 2011, the total volume of cargo it handled increased by about 10 percent from GRT 4,000,000 3,000,000 2,000,000 the previous year to about 2 million RT. This represent about a third of the throughputs of all the ports combined. Its relative standing in the two periods did not change by any significant percentage points. 1,000,000-2,007 2,008 2,009 2,010 2,011 Coastal Overseas Cargo throuhput makeup by port 2011 Port Moresby port handled about a quarter of the total cargo throughput. Also its relative standing in the two respective periods did not differ by any significant percentage point. The total volume of cargo passed through Pom port increased slightly by 8 percent compared to previous period. Oro Bay 3% Rabaul 5% Madang 3% Alotau 2% Kimbe 9% Wewak Others 2% 4% Port Moresby 26% Lae 46% PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 17

22 PNG Ports Corporation Limited Operations Review Containerised Trade In 2011, a total of about 314, 000 Twenty Foot Equivalent Units (TEUs) were traded through PNGPCL s ports. This represented an increase of about 65 percent from the corresponding period. About 60 percent of them were international TEUs and the rest coastal. The increase in inward international TEU throughputs corresponded with increase in the domestic consumption demand for consumer merchandises. The volumes of inward and outward overseas TEUs were in equal proportion. T R G 350, , , , , ,000 50,000 - Overall containerised trade % 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% -2.00% -4.00% -6.00% Lae, as usual, handled the most significant volume totalling of about TEUs, which represented an increase of roughly 13 percent from the previous year s record. Lae s status as an industrial city and logistical hub for mass of the country s imports and exports is a factor behind such a significant TEUs (as well as cargo) movements through its port. Port Moresby maintained its second position, though experiencing a flow of a stable volume of about 88,000 TEUs compared to the corresponding period. Lae and Port Moresby will certainly account for a flow of significant volume of cargo including the TEUs in many years to come. Alotau 2% Madang 2% Wewak 3% Rabaul 4% % makeup of containerised trade by port 2011 Oro Bay 2% Others 3% Kimbe 5% Pom 28% Lae 51% Kimbe recorded a rise of about 16 percent due mainly to an increase in oil palm and timber trade. Rabaul port again consolidated its position as the fourth leading TEUs trading port, though experiencing a modest decline by about 4 percent. Wewak consolidated its position as the fifth trading port with the TEUs throughput increase by about 11 percent. Coastal TEUs accounted for a significant volume of container movement at Wewak port. The rest was handled by the other ports across the country. 18 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

23 2011 Annual Report Operations Review Vessel Call PNGPCL registered overall vessel calls of 7,675 in 2011 representing an increase of about 10 percent compared to the previous period. Both the coastal and overseas calls accounted for equal share of the aggregate calls. The balanced distribution by the sources of call was similar to that of the previous period. In terms of the comparison of call by port, Port Moresby received the largest calls amounting to 30 percent of the total vessel calls for that year. The calls it registered represented an increase of about 38 percent compared to the previous period. Overseas and coastal calls accounted for almost equal share in the total port calls. The relative weights did not change much from the previous period. Rabaul port accounted for about 10 percent of the overall call which is similar to its previous period call registry. In terms of inter period call comparison at that port, the number of vessels increased by about 11 percent in 2011 from that of the previous period. Overall vessel call 9, % 8, % 7, % 6,000 5, % 4, % 3, % 2, % 1, % % makeup of vessel calls by port 2011 Overall, Lae registered the second highest number of calls equating to about 15 percent of the total calls Alotau 6% others 15% Pom 28% which did not change much compared to its standing Madang 6% in the previous period. The number of vessels Lae port registered increased slightly by 4 percent from the Kimbe 9% Wewak 11% Rabaul 11% Lae 14% previous period. Limited, a 100 percent State-owned Enterprise ( SOE ). PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 19

24 PNG Ports Corporation Limited Corporate Governance Board of Directors Management Team Corporate Values Corporate Governance practice Financial Review 20 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT PNGPCL 2011 ANNUAL REPORT.indd 20 9/12/13 11:02 AM

25 2011 Annual Report Corporate Governance Directors Dr. Ila Temu, PhD, MEcon Chairman Job Suat, MSc Director Michael Ikau, BEng Director Robert Nilkare, BCom Director Kepas Wali, MPEng Director PNG PORTS PORTS CORPORATION CORPORATION LIMITED LIMITED ANNUAL ANNUAL REPORT REPORT PNG PNGPCL 2011 ANNUAL REPORT.indd /12/13 11:02 AM

26 PNG Ports Corporation Limited Corporate Governance Executive Management Brian Riches Chief Executive Officer Stanley Alphonse Chief Commercial Officer Larry Hore General Manager Enginerring Paul M. Unas Chief Maritime Compliance office Terrence Furphy Director of Finance Jerome Peniasi General Manager Corporate Services Michael Nye Chief Operating Officer Philip C. Connors Chief Information Officer 22 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

27 2011 Annual Report Corporate Governance Corporate Values At PNGPCL, we value... Service Excellence To strive to serve our customers efficiently, competently and courteously. This will be reflected in our ongoing commitment to provide the necessary technical and soft skill training to support our personnel to ensure continuous improvement in service delivery. Commercially Astute We are committed to maximising our shareholder returns and mitigating risks through an established risk framework. Forward Thinking and Improvement We are dedicated to improving every aspect of the organisation s business activities through a commitment to learning, innovation, communication and investing in technical and civic infrastructure. Safety and Security First Safety and security are our priority in everything we do. Teamwork We are committed to operating on the basis of teamwork and mutual respect, whilst maximising professional growth and the development of our employees. Zero Tolerance We have a zero tolerance approach to fraud and corruption within the organisation. All employees are to act with integrity and honesty at all times. Sustainable Outcomes We are committed to servicing the community and managing the social and environmental impact of our activities. PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 23

28 PNG Ports Corporation Limited Corporate Governance Corporate Governance Practice PNGPCL is highly committed to developing, adopting and practising high corporate governance standards and practices in its day-to-day operations and managements. The Board and Management of PNGPCL genuinely recognises this as one of the pillars for corporate success and with this recognition, the Board and Management continuously endeavour to uphold and practice high corporate governance standards in all commercial decisions. Role of the Board The Board of PNG Ports is responsible for the corporate governance of the company. The Board executes this responsibility by setting the company s strategic direction, establishing targets for management, providing direction towards meeting these targets and monitoring performance of the management. The Board is also responsible for appointing the CEO to oversee and direct the day to day operations of the company. The CEO is accountable for the operational performance of PNGPCL and is the first point of contact when the board interacts with the Management. Board Composition PNGPCL is a State Owned Entity, Corporatized under the Privatisation Act The IPBC is the sole shareholder holding shares in trust on behalf of the Go-PNG and as such the IPBC Act (Amended) 2007 sets forth the underlying provisions by which the company is governed and the appointment of its Board. In turn the IPBC reports to the Ministry of Public Enterprise and State Investment. In the absence of a company constitution PNGPCL as a corporation is also subject to the provision of the Company s Act 1997 in terms of the specific roles of the Board. In accordance with the IPBC Act 2007, the Board members are appointed by the IPBC subject to the approval of the National Executive Council. The IPBC as the sole shareholder of PNGPCL under the IPBC Act appoints directors, the Chairman and deputy chairman. PNGPCL as of the 31st of December 2011 had five (5) Board members, inclusive of the Chairman, which were appointed by the IPBC through the due process stipulated by the IPBC Act Ethical Standards The Directors strive to uphold exceptional ethical standards when conducting themselves in the capacity as Directors of the PNGPCL Board. This also encompasses complying with all relevant legislations and codes of conduct of the State of Papua New Guinea and the Company s Act Directors Interest As at the end of 31st December 2011 none of the Directors was a shareholder to the Company and did not have any material interest in PNGPCL or any related entity that undertook business with the company. 24 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

29 2011 Annual Report Corporate Governance Remuneration of Board In accordance with the Provisions of the Company s Act 1997, Section 212 (f) and (g), the shareholder of the company, through ordinary resolution has resolved that the company will not disclose details of the Directors remuneration in the 2011 annual report. Board Meetings Each year there are periodically scheduled Board Meetings to deliberate on agendas pertaining to the operations of PNGPCL. The management provides Board information papers to inform the Board on progress of certain projects or to propose recommendation for the Board s approval. In accordance with Schedule 4 of the Company s Act 1997 two days notice are given to all directors for a meeting and the meeting will proceed if there is a quorum of majority of the directors. All Board resolutions are passed through a majority vote. Indemnity Financial Results The Directors and the Shareholder are provided monthly and quarterly financial reports in approved templates. In terms of the annual financial statements the Board and the Management ensure that the statements are prepared in accordance with the generally accepted International Financial Reporting Standards ( IFRS ). The financial statements also adhere to the requirements of the Company s Act 1997 which explicitly states that this is the responsibility of the Board. Auditors The Auditor of the company is the Auditor General of PNG. The Auditor General conducts the audit or appoints an agent to conduct audits of the company s accounts on its behalf at the end of each reporting period. The Audit Report is then provided by Auditor General to the IPBC, which is then forwarded to the Public Enterprise and State Investment Minister to be presented in parliament. As prescribed by the IPBC Act 2007, the IPBC has the discretion to indemnify any director of his/her actions as director of PNGPCL. Breaches of the law and criminal acts are specifically exempted from this provision. PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 25

30 PNG Ports Corporation Limited Corporate Governance Financials Review Financial Summary 26 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

31 2011 Annual Report Corporate Governance Financial Performance Analysis Financial Position PNGPCL achieved a record financial position in Total assets increased dramatically over the past five years to more than K1 billion in Whilst liabilities have increased correspondingly, they have been maintained at a manageable level resulting in a solid net asset position over this period. The increase in net asset reflected significant investments in new capital assets to improve the operations of the ports. Major capital assets were financed out of the company s balance sheet as well as government s grants. K'm Financial Position Total Assets Total Liabilities Net Assets Earnings before Interest and Tax PNGPCL s operating revenue has been increasing over the past five years. In 2011, a total of K243.3 million was recorded reflecting a strong business growth due to the successive domestic economic growth. All the tariff lines were performing well. The company s expenditure has also been rising, however, proportionately lower than the growth in operating income. This resulted in successive surplus EBITs. In 2011, PNGPCL s record EBIT was K68.4 million. K'm EBIT % % % % % % Ops revenue Ops expense EBIT % Change EBIT Net Operating Revenue PNGPCL recorded an impressive net operating result of K47.6 million in Net operating profits have increased over the past five years except in 2008 when a net operating loss was made due to the global recession but started picking up in and 2011respectivley saw a record operating profits consolidating PNGPCL s position as one of the performing SOEs in the country. K'm Summary of Net Operating result Owners Equity The total owner s equity jumped significantly to about K756 million in 2011 after being relatively flat for a number of previous years. This jump was factored in heavily by a massive increase in reserves of K652 million following revaluation of property, plant and equipment to current market value and a retained earnings of K95 million. K'm Summary of Owners Equity & Reserves PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 27

32 PNG Ports Corporation Limited Corporate Governance Performance Indicators 28 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

33 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 29

34 PNG Ports Corporation Limited Directors Report Auditor General s Report Statement of Financial Position Statement of Comprehensive Income Statement of changes in Equity Statement of Cash-flows Notes to and forming part of the financial statements 30 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

35 2011 Annual Report Directors Report Your directors present their financial statements on the affairs of PNG Ports Corporation Limited ( the Company or PNGPCL ) for the year ended 31 December 2011 Activities The principal activities of the Company during the course of the financial year were, as promulgated by the Harbours Act (Chapter 240) is the provision of management services, operations and control of all activities governing the movement of ships and cargo handling within its declared ports strategically located throughout Papua New Guinea. Apart from acquisition of Dylup Plantation there were no other significant changes in the nature of activities of the Company during the year. Results The profit for the year ended December 2011 amounted to K47,599,426 (2010: K17,749,290) Dividends Dividend declared in 2011 amounted to K18,072,289 (2010: Nil). Directors The directors at the date of the report of the company are listed below. No director was a shareholder of the Company at 31st December 2011 and none had any material interests in any contract or arrangement with the company or any related entity during the year. The directors during the year ended 31std December 2011 were as follows: Dr. Ila Iemu Job Suat Michael Ikau Kepas Wali Robert Nilkare Remuneration of Directors and Employees In accordance with the provisions of the Companies Act 1997 (section 212(3)), the shareholders of PNG Ports Corporation Limited have resolved that the Company does not need to disclose directors and employees remuneration in its annual report. For and on behalf of the board of directors PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 31

36 PNG Ports Corporation Limited 32 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

37 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 33

38 PNG Ports Corporation Limited 34 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

39 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 35

40 PNG Ports Corporation Limited 36 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

41 2011 Annual Report FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2011 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 37

42 PNG Ports Corporation Limited 38 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

43 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 39

44 PNG Ports Corporation Limited 40 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

45 2011 Annual Report INDEPENDENT AUDITOR S REPORT PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 41

46 PNG Ports Corporation Limited 42 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

47 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 43

48 PNG Ports Corporation Limited 44 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

49 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 45

50 PNG Ports Corporation Limited 46 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

51 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 47

52 PNG Ports Corporation Limited 48 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

53 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 49

54 PNG Ports Corporation Limited 50 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

55 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 51

56 PNG Ports Corporation Limited 52 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

57 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 53

58 PNG Ports Corporation Limited 54 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

59 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 55

60 PNG Ports Corporation Limited 56 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

61 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 57

62 PNG Ports Corporation Limited 58 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

63 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 59

64 PNG Ports Corporation Limited 60 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

65 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 61

66 PNG Ports Corporation Limited 62 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

67 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 63

68 PNG Ports Corporation Limited 64 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

69 2011 Annual Report PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT 65

70 PNG Ports Corporation Limited 66 PNG PORTS CORPORATION LIMITED 2011 ANNUAL REPORT

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72 PNG Ports Corporation Limited Stanley Esplanade Port Moresby PO Box 671 PORT MORESBY National Capital District Phone Fax PNGPCL 2011 ANNUAL REPORT - Covers & Contents.indd 2 9/12/13 11:09 AM